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January 6, 2011 / compassioninpolitics

How can local goverment encourage innovation and small business?

How can government best support small business, start ups, and innovation?

Phil McKinney recently pointed out:

Its these entrepreneurs and their dreams that create economic opportunity for cities, regions and countries. So, what can governments do to support and encourage innovation development from entrepreneurs?

1. Create incentives for risk capital. Establish policies (e.g. reduced capital gains taxes) and programs (e.g. matching funding with the private sector such as the SBIR from the US government) to ensure the availability of risk capital.

2. Establish incentives for small and large businesses to co-innovate together. Create a tax and IP incentive for large businesses to invest, partner and support the innovations created by small businesses. Small businesses need the size and scale of large businesses to bring their ideas to market while at the same time, large businesses need the breakthrough innovations coming from small businesses.

3. Encourage entrepreneurs to invest in R&D. Eliminate the negative incentives such as the US governments AMT that wipes out any R&D tax credit for most small businesses. (read more)

4. Build leverage into innovation programs. Establish incentives (reduced red tape, special infrastructure investment, hiring and training incentives, etc) to invest in common areas thereby creating an ecosystem of participants (university, investors, entrepreneurs, large businesses).

5. Commit to graduating workers prepared for the creative/innovation economy. Embed creativity and innovation training into each subject taught in the classroom. Make creativity/innovation just as important as the other core subjects. What are some example of the skills that students need to learn?

You can read the full article here which makes a patent based argument (mostly grounded in health care/medical and IT patents) for encouraging small business growth.

Additionally, reading Judy Estrin’s book on keeping the our competitive economic edge entitled “Closing the Innovation Gap” would be a smart, smart move.

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